Revenues of Grasim Industries Ltd for the third quarter of FY10 grew by 4.4% year-on-year (y-o-y), better than our estimates. This was boosted by improvement in the viscose staple fibre (VSF) business performance as well as cement volume gain over the third quarter of FY09.
Cement volumes for Grasim registered 17.3% increase as against the third quarter of FY09 while for UltraTech Cements Ltd, volumes registered an increase of 10.4% as against the third quarter of FY09. Consolidated cement volumes registered a growth of 12.1% and stood at 9.79 million tonnes for the third quarter of FY10. Blended cement realizations have also witnessed a decline of 4% over the second quarter of FY10.
Ready mix concrete (RMC) volumes have witnessed an improvement sequentially due to demand recovery from the real estate segment while RMC realizations have remained flattish sequentially and down by 3% on an yearly basis. White cement volumes have witnessed an increase of 18.3% and realizations improved marginally in the third quarter of FY10 against the third quarter of FY09.
Wall care putty segment has witnessed a sharp improvement in demand and volumes registered an increase of 37.5% y-o-y. Overall cement division continues to contribute a significant proportion of total revenues and is currently at 76% of the total revenues.
We fine tune our estimates to factor in improvement in VSF volumes and realizations as well reduction in overall borrowings. We thus expect net profits to grow at a compound annual growth rate of 8% between FY09 and FY11. At current market price, stock is trading at 7.6x and 9.4x price-earnings and 4.3x and 4.7x enterprise value/earnings before interest, tax, depreciation and amortization for FY10 and FY11, respectively. We continue to maintain reduce.